MGMT 470: Exam III - Section 1

In ______ ______, you sell something, usually a base system, at a relatively low prices, but the expendables it uses are relatively expensive - Ex: The cost for a printer is low, but each ink cartridges are high

captive pricing

Case: Wil's Grill John learned about the "______ ______" movement - characterized by locally produced, organic foods, and sustainable practices.

clean food

(5) Contextual Factors of Pricing: When starting out, maximizing profits is better than increasing market share, as competing on price may lead to negative growth

company objectives

(5) Contextual Factors of Pricing: When comparing price, compare matches in product bundles

competition

(7) Pricing Strategies: Setting a price at the highest level the market will bear, usually because there is no competition at the time

skimming

_______ ______ ________ ___ _______: Theories based on the assumption of limited human abilities

bounded rationality models of management

(3) Examples of Intermediaries: An intermediary business that represents a manufacturer's product or service to other business-to-business intermediary firms

an agent

Case: MuMate The company hired "_____ _____" identified through Taylor's network to market MuMate to key influencers.

brand ambassadors

(7) Pricing Strategies: Setting the price for an item relatively low and then charging much higher prices for the expendables it uses

captive pricing

(5) Contextual Factors of Pricing: Everyone who handles the product expects to make something, which increases the price through price escalation

channels of distribution

(5) Contextual Factors of Pricing: 1. Your ________ ________ 2. ________ ________ 3. ________ ____ ________ 4. The ________ 5. ________ & ________ ________

company objectives, marketing strategy, channels of distribution, competition, legal & regulatory issues

(3) Things we need to make Good Decisions (according to the Bounded Rationality Model): 1. _____ _____ 2. ______ ways to _____ _____ so it is _______ 3. Methods to _____ _____

good information, efficient, condense information, understandable, compare alternatives

Case: MuMate The company relied on "______ _____" and word-of-mouth marketing.

guerilla marketing

_________ ________ Definition #1: Unusual and nearly free advertising

guerilla marketing

_________ ________ Definition #2: A relatively new concept in market bu the start-up company's best friend

guerilla marketing

_________ ________ Definition #3: The use of creative and relatively inexpensive ways to reach your customer Ex: doorknob hangers, flyers under windshield wipers, T-shirts, balloons, sidewalk messages

guerilla marketing

An ________ Product: Product for which there are few substitutes and for which a change in price makes very little difference in quantity purchased.

inelastic

Elastic vs. Inelastic Products: Essential products with NO substitutes

inelastic products

People who get the product to the end consumer for a percentage of the profits

intermediaries

(4) Fundamentals of Pricing: 1. _______ _______ 2. _______ 3. _______ 4. _______ _______

margin pricing, elasticity, value, contextual factors

The Secret to Pricing: Understanding: - the _______ - the cost of _______ _______ - the _______ your customers are willing to pay

market, doing business, prices

______ ______ Definition 2: Knowing your costs and the markup is a fundamental pricing concept

markup pricing

________ Definition 1: The purchase of inventory only after a sale is made; very typical with Internet firms

microinventories

________ Definition 2: - A set of goods or services that consists of only one or a few items - These are the small business's answer to just-in-time inventory methods in big business

microinventories

(7) Pricing Strategies: Setting a price that ends in the number 5,7, or 9 - Ex: $99.99

odd-even pricing

Charging lower prices at certain times to encourage customers to come during slack periods

off-peak pricing

_________ ________ Definition 1: The highest price that would produce your desired level of sales in your intended market

optimum price

_________ ________ Definition 2: The price that would generate the most income possible for the product or service you are selling over the course of a year

optimum price

Combining two or more products in one unit and pricing it less than if the units were sold separately

price bundling

If dropping the price increases sales, this is _________ _________.

price elasticity

Charging an outrageously high price for something

price gouging

(7) Pricing Strategies: The practice of setting (usually) three price points: good quality, better quality, best quality

price lining

A form of communication that encourages the customer to take immediate action - Ex: coupons, sales, or contests

sales promotions

(7) Pricing Strategies: 1. _______ 2. _______ pricing 3. _______ pricing 4. _______-_______ pricing 5. _______ pricing 6. _______ pricing 7. _______ _______

skimming, prestige, premium, odd-even, partition, captive, price lining

(4) Concepts of the Law of Supply & Demand: 1. When supply is adequate, prices are _______ 2. If supply shrinks, prices go _______ 3. If demand suddenly grows, prices are likely to go _______ 4. Reasonable increases are expected, but beware of _____ ____

stable, up, up, price gouging

Case: Wil's Grill Alternatives: John could... 1. Expand his "______ ______" business OR 2. Add a ______ ______

street food, catering business

(3) Examples of Intermediaries: An intermediary business that buys (typically in large quantities) and sells (typically in smaller quantities) to businesses rather than consumers

a wholesaler

The amount an entrepreneur adds to costs to provide a profit

markup

To make elasticity work, keep in mind the _______ people see in your product.

value

(3) Examples of Intermediaries: 1. A ______ 2. A ______ 3. An ______

wholesales, retailer, agent

The _____ Goal of Pricing: To set the price as high as you think you can, using your competition and customers' responses as a check

#1

The _____ Goal of Pricing: To use pricing strategies to drive sales

#2

Case: MuMate KEY ISSUE: A venture capital firm like _____, could offer ______ quickly, but was it worth the price in terms of _____ _____ and _____ _____ _____?

DPV, capital, equity dilution, loss of control

An _________ Product: Product for which there are any number of substitutes and for which a change in price makes a difference in quantity purchased.

Elastic

__________ is where the law of supply and demand relates to business.

Elasticity

(3) Examples of Intermediaries: An intermediary business that sells to consumers or end users of a product (typically in single or small quantities)

a retailer

One implication of the assumption that people are limited in their ability to use information is that the more information available to be included into the decision process, the less efficient the process will be

bounded rationality models of management

(4) Key Factors considered when determining an Optimum Price: 1. _____ for the product or service 2. _____ delivered to the customer 3. _____ set by _____ _____ 4. Your _____ _____ & ______ ______

demand, value, prices, competing firms, business strategy & product placement

Elastic vs. Inelastic Products: Products with MANY substitutes

elastic products

From economics, the idea that the market's demand for a product or service is sensitive to changes in its price

elasticity

Case: Hebon Koroth recognized the potential for ______ to help solve some of the world's aptly named "_____ ______" - of global hunger, food security, and rural poverty.

jackfruit, wicked problems

(For big businesses) The practice of purchasing and accepting delivery or inventory only after it has been sold to the final customer

just-in-time inventory

The ___________________________: The economic theory that describes how the demand for products (or services) and the supply of them affect each other

law of supply & demand

______ ______ Definition 1: (The most widely used pricing method) A price-setting method where an amount is added to the cost of a product to set the retail price and provide a profit

markup pricing

Your fundamental goal should be setting the ________ _______.

optimum price

Case: Hebon Decision: Should Koroth ... 1. Expand his business _______ to capitalize on the growing trend in the US OR 2. Should he focus on ________ _______.

overseas, domestic growth

(7) Pricing Strategies: Setting the price for a base item and then charging extra for each additional component

partition pricing

_________ Discounting: A sale run on a schedule that is unpredictable to the customer

random

(5) Contextual Factors of Pricing: Talk to your accountant & attorney for specific rules of your product

legal & regulatory issues

(5) Contextual Factors of Pricing: Your price must be consistent with your marketing strategy

marketing strategy

_________ Discounting: Sales conducted at predictable intervals, such as before major holidays

periodic

(7) Pricing Strategies: Setting a price above that of the competition to indicate a higher quality

premium pricing

(7) Pricing Strategies: Setting a price above that of the competition to indicate your product is a status symbol

prestige pricing